Tag Archives: spread betting companies

Spread Betting And Contracts For Difference

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Most of the main providers of spread betting services are also very active in the cfd trading market and while both spread betting and cfds promise high returns and healthy profits for a relatively small outlay there are some significant differences between the two.  Cfds were initially used by hedge funds and institutional investors to hedge their exposure to stocks on the London Stock Exchange in a cost-effective way.

If you compare spread betting with cfds, there appears to be little difference.  It’s true that cfds are liable to capital gains tax whereas spread betting is free from both stamp duty and capital gains tax. However, losses incurred from spread bets are gone for good while cfd losses can be offset against future profits for tax purposes.Spread betting positions are also very similar to futures products in that they have an expiry date (unlike cfds which don’t) and will only remain open until the contract runs out (usually daily, monthly, or quarterly).   As with any leveraged product, maximum exposure is not limited to the initial investment and it is possible to lose more than you put in.  It is therefore prudent to ensure these risks are mitigated through the use of “stop loss” orders.

Both spread betting and cfds allow the user to go short and, because they are margined products, you can “gear up” or take an underlying position that is much greater than your actual available funds. Retail investors soon realised that spread betting strategies needed to take advantage of the ability to trade on leverage.    The main difference between the two is that spread betting firms post their own “take it or leave it” price exactly as a bookie would, whereas with cfd, you are the price maker.  Because of this, the cfd spread quote will always be very close to the underlying price of the share or commodity that you are following.seo birmingham

Who Pays The Bank Levy?

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It’s been confirmed that banks operating in the UK will be hit with a levy to be introduced in January 2011 and set to raise more than £8 billion over four years.  The UK operations of foreign banks will also have to pay the levy, but it will not affect smaller banks and building societies.   The bank levy is part of a joint move between the UK, France and Germany.  It will be set at 0.04% in the first year, generating about £1.15 billion.  The levy will then rise to 0.07%, raising an estimated £2.3 billion in 2012-13, £2.5 billion in 2013-14, and £2.4 billion in 2014-15.

Considering there was speculation that the chancellor would seek to raise at least £5 billion a year, a levy to raise a maximum of just £2.5 billion a year by 2013-14 means the banks may have got off very lightly!The levy is a tax on the total size of a bank’s balance sheet, minus insured retail deposits and capital with a lower rate applicable to longer-term wholesale funding.   On this basis, it’s likely that Lloyds TSB and Royal Bank of Scotland are going to pay the largest chunks of the levy followed by Barclays and HSBC.None of this is likely to diminish the overall enthusiasm fo spread betting companies though. It’s a marginal activity, meaning that the bets don’t have to be huge to make a great deal of money.

Spread betting strategies may seem like a legitimate investment exercise, provided you remember never to bet more than you can afford to lose.  With some companies requiring deposits from as little as 3% of the equivalent direct investment value, it only needs a slight movement in the share price in the wrong direction to generate huge losses.  You can limit those losses; however you still have to pay the bookie!And in terms of the bank levy, would anyone care to take a bet that the £2.5 billion cost will be passed on to smaller businesses and retail customers by all the banks involved?  So who will pay the bank levy?We all will, every one of us!

Financial Spread Betting Issues

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Has the financial situation from the last few years made you question the convential wisdom of investing? Do you wish that you were in more control of your finances and investing? A lot of people are and they are starting to trade for themselves as they are less likely to trust other people. One of the ways they are trading is by using financial spread betting.

I will be telling you about how financial spread betting works but before I do I want to show you how it might’ve help in the recent events. Possibly its biggest advantage is that you can go short. What I mean by this is if you feel that the market will decline then you can set up a trade that will profit if it does. Given how markets have performed this strategy probably would’ve done you quite well.

You don’t actually own the asset when you are financial spread betting and this is why you can do it. You make your profits and losses based upon the movement of the underlying asset after you initiate the trade. If you bet £2 for every point you will either make a profit or a loss of £2 for each point the price changes.

Does that sound complicated? You shouldn’t be concern as it was confusing for me when I began. Take your time learning and you will get there. Why not open a dummy account first? Many financial spread betting companies of this type of service. It is a great opportunity to learn.

A further advantage of financial spread betting is the tax situation. At the moment you don’t incur tax if you live in the UK. It doesn’t matter if you make millions, this is true. Obviously you need to be making profits for this to be of benefit.

I hope that I have demonstrated some of the advantages of financial spread betting. There are others benefits as well as some negatives that you should understand before you start.

Financial Spread Betting Issues

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I am going to be honest right at the beginning of this article. I want to try and put you off financial spread betting. This is right, I want you to really think about it. I bet you haven’t heard that before.

Why am I wasting my time writing trying to persuade you not to take up financial spread betting? Well all I read is how good it is. I want you to get a really balanced picture, not just ‘investments can go down as well as up’ line you read at the end of other articles. If you still want to do it at the end of this then great.

I think that the easiest way to get your attention is by talking about money and letting you know that you are likely to lose it. How good are you at coping when you lose? Can you take it on the chin and move onto the next trade? The best traders can. Do you have the discipline to bet small so you can make it through the first year in tact ready for another one?

Not many traders survive the first year so if you have then a very well done. It is an achievement that you should be proud about. Now the real work begins, now you want to make some money. This is where it gets really hard. The big profits in financial spread betting usually only come to a small number of traders.

Do you have a personal life? If you decide to do financial spread betting then you are like to lose it. The best traders (the ones that make the money) are watching the market throughout the day and night. They do it for the love of it. Do you have the passion to put the hours in?

If you are still reading this then you are obviously serious about it. That is good because you need to be committed to your next task. There are so many financial spread betting companies out there, now you have to select one!